By Financial Post |
As population sees record growth driven by new immigrants, economists say they’re crucial to keeping things like pensions and health care stable
There are some calculations with pension plans that require advanced math, and some that don’t. One that doesn’t is the simple fact that Canadians are rapidly aging.
The average age of the population is moving up as life expectancy increases, birth rates decline and the baby boomer generation ages. By 2040, 25 per cent of the population will be at least 65 years old, up from 17 per cent today, according to Conference Board of Canada projections.
The impact of having fewer Canada Pension Plan contributions from workers and more payments going out to beneficiaries is also straightforward: Either workers contribute more or beneficiaries get paid less.
“That’s where immigration plays into it,” said Keith Ambachtsheer, director emeritus at the International Centre for Pension Management. “We need immigrants for a lot of reasons, but one of them is to become future contributors.”
Immigration is often a hot topic of discussion, no more so than during an election. Statistics Canada this week reported that the country’s population reached 37.6 million people as of July, an annual growth rate of 1.4 per cent — or about 531,000 people — representing the largest annual growth in Canada’s history and the highest of any G7 country, mostly, though not entirely, driven by immigration.
“By international standards, it’s high,” Ambachtsheer said. “But in terms of Canadian culture, it’s sort of a deep question that requires a lot of thinking. Is there an optimal rate of immigration?”
Politicians make different claims about how many people the country can handle, but economists generally agree on one simple point: Immigrants are a necessary component to achieve economic growth and keep taxpayer-funded systems such as pensions and health care stable and balanced.
This year, Canada accepted some 300,000 immigrants, an increase from the roughly 250,000 accepted per year on average during the previous decade. That number is expected to rise even further to 350,000 people per year by 2021.